Businesses and trade unions united to urge the Bank of England not to raise interest rates today as the pound soared to a fresh all-time high against the euro.
The Monetary Policy Committee began its two-day meeting yesterday against a background of mounting concern over the devastation that sterling was wreaking on the manufacturing sector.
The Confederation of British Industry warned a rate rise would "tip the economic scales in the wrong direction". Its retail sales survey showed high street sales picked up in April but fell short of expectations.
Alastair Eperon, chairman of the survey panel and a Boots executive, said: "The underlying trend reveals steady growth, which is likely to be sustained, despite retailers facing tough competition and pressure to keep prices down. The Bank should not see this as a signal to put up interest rates."
The British Chambers of Commerce echoed the call, saying: "The Bank has got to recognise the clear signs that economic growth is slowing and that a hike at this stage would pile on further pressure on hard-hit manufacturers and exporters."
The Institute of Export went further and called for a rate cut. Ian Campbell, its director-general, said; "Inflation is not the issue at present. Trade and employment are."
John Monks, the general secretary of the Trades Union Congress, said a rise would be "disastrous" for manufacturers, exporters and the tourist trade. "Britain's overvalued currency is now doing real damage to jobs and prosperity," he said.
Their comments came as the euro plunged below $0.90 against the US dollar for the first time. "There is no floor for the euro," said Nick Stamenkovic, senior analyst at IDEAglobal.com.
"It is on a momentum of its own and 85 cents looks a distinct possibility."
The euro fell against the pound hitting a low of 57p. Against the old deutschmark, sterling is worth DM3.43, its highest since July 1997 while its trade-weighted index hit a 14-year high of 113.4 - 4 per cent up on last month. Interest rate worries contributed to the largest one-day points fall on the London stock market for a year. The FTSE closed down 188.6 or 3 per cent lower at 6,184.8.